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On February 13, President Obama released his budget, which outlines significant new health care investments, some changes in Medicare and Medicaid, and investments in jobs programs.

The Big Picture

President Obama’s fiscal year 2013 budget plan (4.5 MB pdf) would cut taxes by $4.1 trillion over 10 years. Most of this revenue loss results from his proposal to make permanent 79 percent of the Bush tax cuts, which would reduce revenues by $3.5 trillion over a decade. Counting added interest on the national debt, the President’s proposed Bush tax cut extensions would cost $4.2 trillion over a decade.

The budget plan includes some proposals that, together, would raise $1.1 trillion over a decade. The most prominent of these include scaling back tax subsidies for the wealthy, starting to crack down on offshore tax avoidance by U.S. corporations, asking the “too-big-to-fail” banks to pay for their government guarantee, and ending tax subsidies to oil and gas companies.

Health and Human Services

Obama’s budget for 2013 calls for $76.4 billion — $300 million more than last year — for the U.S. Department of Health and Human Services (HHS). Medicare and Medicaid spending could be reduced by $364 billion over 10 years, with most of these savings achieved by weeding out wasteful spending rather than shifting costs to beneficiaries.

Highlights include:

• Medicaid would be cut by more than $50 billion — including $17 billion over 10 years by establishing a new, and already controversial, “blended rate” for Medicaid and CHIP in 2017 and $21 billion by reducing provider taxes and increasing Medicare cost-sharing requirements (which would increase state Medicaid costs since Medicaid pays the Medicare cost-sharing requirements for the “dually eligible”).
• Medicare would see $267 billion in cuts, many of which had been proposed earlier, including $35 billion from reduced provider “bad debt” payments; $9 billion from graduate medical education payment cuts; $56 billion gleaned through payment changes; and $155 billion from requiring drug manufacturers to provide Medicaid rebates for all low-income beneficiaries.
• Funding would increase for both the implementation of health care reform’s state-based insurance exchanges and an acceleration of “state innovation waivers,” which would allow states to implement alternatives to the law in 2014 rather than 2017. The Affordable Care Act‘s Prevention and Public Health Fund would be cut by $4 billion over 10 years.
• $3.1 billion would be invested to support the creation of 25 new health centers nationwide and funding for 2,800 new primary care providers.
• The Administration on Aging budget request is $7.1 million over the total amount enacted for FY12. It includes $8 million for Adult Protective Services, including $7 million for demonstration projects; $10 million in mandatory funding for Aging and Disability Resource Centers (ADRCs); and an additional $9.5 million for Alzheimer’s Disease Supportive Services.

Other Key Provisions

The Obama budget calls for $350 billion in job growth measures, spread mostly between FY 2012 and FY 2015. These include:

• $50 billion in road and transit maintenance and upgrading;
• $30 billion to modernize at least 35,000 schools;
• $30 billion to hire and retain teachers and first responders under Project Rebuild, which will hire workers in low-income communities (to “re-purpose” residential and commercial properties); and
• a new small business tax credit for companies that hire new workers.

Job training and placement funding increases for low-income youth and adults are urgently needed. Thus, the budget supplements existing Workforce Investment Act funds, with a new initiative called Pathways Back to Work. This is a $12.5 billion project that will provide subsidized jobs and training for low-income, low-skilled workers, and summer and year-round jobs and training for youth.

Information on the Medicare/Medicaid and Older Americans Act sections is on the HHS website. (See the HHS Budget in Brief for the Medicare and Medicaid section, which begins on page 48.)

An overview of the budget is available on the Office of Management and Budget website.

– by Carol Regan, PHI Government Affairs Director

Valerie Jarrett, a senior advisor to President Obama, wrote about why Medicaid matters on the White House blog.

In her entry, Jarrett — who spoke at the inaugural National Care Congress on July 12 — tells the stories of Linda Guzman and Shannon Saunders, two ordinary Americans who have benefited from Medicad.

Linda’s son, who has autism and a connective tissue disorder, relies on Medicaid for medication, surgeries, and therapy. Medicaid also pays for his personal care services, allowing Linda to work full-time.

Shannon, meanwhile, was diagnosed with cerebral palsy at age two and told she would never walk or talk. Thanks to Medicaid, Shannon was able to receive crucial medical treatments, and today, at age 13, says she wants to be a teacher when she grows up.

Because of such stories, Obama strongly opposes Republican proposals to slash Medicaid funding, Jarrett says.

“Are there any Americans who really believe that we should ask Linda to quit her job when we need everyone contributing to our economy, or that we should ask Shannon to sacrifice her future just so that a millionaire can receive another tax cut?” Jarrett writes.

Like Jarrett, PHI opposes cuts to Medicaid, as detailed in the ongoing PHI fact-sheet series Medicaid Matters.

– by Matthew Ozga

Tricia Neuman of the Kaiser Family Foundation

In a standing-room-only briefing on Capitol Hill on June 10, advocates made their case to congressional staff about the harmful impact of cuts to Medicare and Medicaid on older adults.

The briefing, “Medicare and Medicaid: Know the Difference, Know the Impact,” sponsored by the Leadership Council of Aging Organizations (of which PHI is a member), shared in-depth data on the two health insurance programs and gave concrete examples of what proposed cuts would mean for older adults.

Presenters included:

• Tricia Neuman, Vice President and Director, Medicare Policy Project, Kaiser Family Foundation;
• Howard Bedlin, Vice President, Public Policy & Advocacy, National Council on Aging; and
• La’Kasha Hines, CNA, Service Employees International Union (SEIU) Healthcare Pennsylvania.

The presenters also reminded the policymakers who attended of the human toll of budget cuts. Hines noted that the individuals and families she works with are “already at their breaking point,” and that cuts would directly affect staffing levels and the quality of care she and her co-workers are able to provide.

Senators Commit to Preserving Medicaid

Also last week, Senator Jay Rockefeller (D-WV) announced that 41 Senators have publicly stated their commitment to preventing drastic cuts to Medicaid — 37 signed onto a letter (pdf) he circulated, and four sent separate letters.

Together, these 41 Senators provide enough votes to block a GOP effort to drastically cut federal funding for the Medicaid program.

However, the absence of sign-ons from several Democratic leaders — including Majority Leader Harry Reid (NV), Finance Committee Chairman Max Baucus (MT), and Budget Committee Chairman Kent Conrad (ND) — suggests that Medicaid may still be vulnerable to significant cuts as part of negotiations between congressional leaders from both parties and the White House over raising the debt limit.

This week advocates kept up their push to protect Medicaid with calls and emails to members of Congress, urging them to oppose damaging cuts to the program.

– by Gail MacInnes, PHI National Policy Analyst

In a policy address on April 13, President Obama shared an outline of his proposals for cutting the federal deficit by $4 trillion, including reducing federal Medicare and Medicaid spending by $480 billion over 12 years.

Obama’s speech follows last week’s release of House Budget Committee Chairman Paul Ryan’s (R-WI) proposed FY2012 Budget Resolution, which incensed advocates for older adults and other vulnerable populations by proposing cuts of more than $6 trillion over 10 years, and converting the Medicare program into a voucher program and the Medicaid program into a block grant. (See a side-by-side comparison of the two plans from The New York Times.)

Obama’s proposals for reducing Medicare and Medicaid spending, though far less dramatic than those proposed by Ryan, could affect direct-care workers and consumers of long-term services and supports. In contrast with the Ryan proposal, Obama includes some tax increases for wealthy Americans in order to mitigate spending cuts for Medicare, Medicaid, and Social Security.

Strengthening the IPAB Board to Reduce Medicare Spending

First, Obama proposes to strengthen the power of the Independent Payment Advisory Board (pdf) that was created by the Affordable Care Act.

Under current law, the Independent Payment Advisory Board (IPAB) is tasked with making recommendations to Congress for reducing Medicare costs anytime cost growth exceeds GDP per capita plus 1 percent. Obama proposes lowering the trigger for IPAB recommendations to GDP per capita plus 0.5 percent. According to a Center for Budget and Policy Priorities statement (pdf), Medicare costs have historically risen at about GDP per capita plus 2 percent.

Because the IPAB is prohibited from recommending increased cost sharing for beneficiaries, it will likely — in either its current or a “strengthened” form — have to recommend some cuts in provider payments.

Since Medicare is a funder of both skilled nursing facility and home health care, cuts in provider payments could have an impact on direct-care worker compensation and on consumer access to care.

Changing Federal Medicaid Matching Formulas

Obama also proposed replacing the current mix of federal Medicaid matching formulas, which vary by program, with a single federal matching rate for all Medicaid spending. This rate would be structured to encourage efficiency; it would also increase if a recession caused enrollment and cost increases.

Obama has asked state governors to formulate a plan to cut Medicaid spending by $100 billion over the next 10 years. Details are lacking, but — though significantly less harmful than the $771 billion in Medicaid cuts in the Ryan budget resolution — the $100 billion in cuts proposed by Obama could have a negative impact on Medicaid programs that are classified as “optional,” including home- and community-based long-term services and supports.

– by Gail MacInnes, PHI National Policy Analyst

Time is running out to join the nearly 1,500 national, state, and local organizations, including PHI, that are supporting the SAVE for All campaign.

March 25 is the deadline to sign the Statement of Principles (pdf), which tells Congress to save low- and moderate-income people from loss of economic security due to threatened severe cuts in federal funding and to save the federal capacity to spur economic recovery and progress that benefits all Americans.

The proposed federal cuts threaten the health and development of millions of low-income children, risk harm to seniors and people with disabilities, and reduce the incomes of many millions of families, the Statement of Principles explains. The proposed cuts would put education, health care, affordable housing, energy assistance, and other vital domestic programs at risk.

Nearly half — 46 percent — of direct-care workers receive public benefits such as Medicaid or food stamps.

SAVE for All — which stands for Strengthening America’s Values and Economy for All — is a coalition of national and local advocacy groups, service providers, faith-based organizations, labor, civil rights groups and policy experts.

– by Deane Beebe

PHI and about 50 other national organizations voiced their opposition to the proposed $3.8 billion cuts to employment and training funding in H.R. 1, the House-passed FY 2011 Continuing Resolution (CR).

On March 2, the groups sent a letter (pdf) to the chairmen and ranking members of the Senate Appropriations Committee and the House Subcommittee on Labor, Health and Human Services, Education, and Related Agencies, stating, “we urge you in the strongest possible terms to reject the proposed cuts to WIA and other critical job training programs under H.R. 1.”

The budget cuts in the CR would completely eliminate funding for the Adult, Dislocated Worker, and Youth programs under the Workforce Investment Act (WIA) in Program Year 2011. The proposal would also slash or completely eliminate funding for programs such as Job Corps, YouthBuild, and Community Service Employment for Older Americans.

WIA funding supports programs that help to develop and train the direct-care workforce. Programs such as Pennsylvania’s Health Care Industry Partnerships, a sectoral strategy that was made possible in part by the state’s use of the discretionary Title 1 WIA funds, for example, would be hard hit.

The organizations wrote that “the cuts included in the House CR impact current and future workers at all ages, incomes, and skill levels, and will be felt across the entire country.”

They call the proposed cuts “draconian” and explain that both workers and employers would suffer if the employment and training funding was slashed.

The National Skills Coalition, National Law Center on Homelessness & Poverty, American Association of Community Colleges, United States Conference of Mayors, and Wider Opportunities for Women were among the many organizations that signed onto the letter.

– by Deane Beebe